Eagle Ford oil expected to surpass 1 million barrels per day next year

Published 8:08 am, Friday, September 20, 2013

By Jennifer Hiller

San Antonio Express News

SAN ANTONIO -- Eagle Ford Shale oil production is expected to reach 1 million barrels per day next summer -- and keep growing as operators add tens of thousands of more wells to the giant South Texas field.

"This is a huge oil producer," said Subash Chandra, a managing director and at the investment banking firm Jefferies & Co. He spoke Wednesday to more than 4,000 people attending Hart Energy's third annual DUG Eagle Ford Conference at the Convention Center.

More than 11,100 wells have been permitted in the Eagle Ford since 2008, but the research firm DrillingInfo estimates there are at least another 85,000 wells left to drill in the field.

"Consider that to be a floor estimate," said Allen Gilmer, chairman and CEO of DrillingInfo. "It's not going to be less than that."

The firm expects Eagle Ford oil production to peak in 2022 at around 1.8 million barrels of oil per day -- around double the current production -- and start declining from there.

Even with the rising production numbers, Chandra said that Wall Street has "underappreciated" the Eagle Ford so far.

"The Permian and the Bakken have gotten a lot of attention and the Eagle Ford has not, and that needs to be rectified," Chandra said.

He said it could be because the first wells in the Eagle Ford in 2008 were gas wells, which have since fallen out of favor thanks to depressed natural gas prices. He said that a few years ago he was focused on the Bakken Shale in North Dakota and couldn't imagine that the Eagle Ford could be as prolific for oil production.

When the first strong oil wells in South Texas came in, Chandra said, "I missed it. The Street missed it."

The major shale oil basins -- the Bakken, Permian Basin and Eagle Ford -- now account for about a third of U.S. oil production, but will make up half of U.S. oil production soon, he said.

However, the Eagle Ford is better positioned to get oil and natural gas to market by pipelines or rail, and from there to the Gulf Coast and beyond.

"Usually when you get a high-growth basin, investors foam at the mouth about will takeaway keep pace with growth, etc.," Chandra said. "It's not an issue here. That is a relative advantage that I think the Eagle Ford has versus the other couple of shale oil plays that tends to be overlooked. We're not landlocked here in the Eagle Ford and there are a lot of advantages that come with that."

Current Eagle Ford production estimates vary wildly -- anywhere from around 600,000 barrels per day according to the Texas Railroad Commission to 800,000 barrels per day according to some analysts.

If the Eagle Ford were to surpass the 1 million barrel mark, it would make more oil daily than countries such as Oman or Columbia, according to data from the U.S. Energy Information Administration. By comparison, Saudi Arabia produces around 10 million barrels per day.

For now, the Eagle Ford remains in the early stages of development, but is starting to mature in many ways.

Most oil and gas leases require operators to drill within a certain period of time or lose the right to explore the land. While companies had been racing across South Texas to drill wells in an attempt to hold acreage by starting production, now most Eagle Ford operators are shifting into pad drilling, placing multiple wells per site.

That's saving companies around $600,000 to $700,000 per well, and is just one of the cost savings operators are finding as they get better and faster in the Eagle Ford, said Jeff Seiler, managing director of banking firm Scotia Waterous.

"I have no doubt that what we see is just the tip of the iceberg," he said.

Companies also are testing everything from well spacing to the amount of fluids used during hydraulic fracturing to figure out how to wring the most oil possible from the shale. And technology is playing a greater role as companies track and react to reams of data they're collecting from wells in real time.

"We've experimented and will continue to experiment in a controlled way with everything," said Lance Robertson, vice president of Eagle Ford operations for the Houston-based Marathon Oil Co., one of the largest operators in the field. "The question is, how much longer will the wells get better in the Eagle Ford? I'll be honest and say I don't know. I think we have a clear expectation that they're going to get a lot better next year than they were this year."

But even with many operators fine-tuning their techniques in the field, there's still room for deals. An estimated 130,000 acres in Eagle Ford oil and gas leases will expire this year, and Gilmer said that gives newcomers an opportunity to enter the field, or for established companies to add to their portfolios.